ON THE CYCLICALITY OF IRISH FISCAL-POLICY

In this paper, we tackle the important issue of cyclicality in the beh aviour of Irish fiscal policy. We first review arguments in favour of the optimality of countercyclical fiscal policy. Next we outline a pol itical economy model that explains procyclical fiscal policy as the ra tional, albeit suboptimal, outcome of an allocation game among competi ng fiscal groups. In our empirical work, we find the evidence generall y rejects countercyclicality in Irish fiscal policy. We conclude by br iefly discussing some institutional reforms that may improve the opera tion of fiscal policy over the economic cycle.